Fitch Affirms Mediacom's IDR at 'B+'; Removed from Rating Watch Negative

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'B+' Issuer Default Rating (IDR) assigned to Mediacom Communications Corporation (Mediacom) and its wholly owned subsidiaries Mediacom LLC (LLC) and Mediacom Broadband LLC (Broadband) at 'B+', and has removed the ratings from Rating Watch Negative. In addition, specific issue ratings assigned to the company's senior secured and senior unsecured debt, as listed at the end of this release, have also been affirmed and removed from Rating Watch Negative. Approximately $3.4 billion of debt outstanding as of June 30, 2010 is affected by Fitch's actions. The Rating Outlook is Stable.

Fitch's rating action follows the announcement by Rocco B. Commisso, Mediacom's chairman and chief executive offer, that he has withdrawn his offer to purchase all of Mediacom's outstanding class A and class B common stock not already beneficially owned by Commisso for $6.00 per share in cash. From Fitch's perspective the transaction, if accepted by the special committee of Mediacom's board of directors and approved by a majority of shareholders of Mediacom's common stock not owned by Commisso, has the potential to weaken Mediacom's credit profile by increasing leverage to a level outside of Fitch's expectations for the 'B+' rating category and hindering the company's ability to generate expected levels of free cash flow.

Overall, Fitch's ratings for Mediacom incorporate the company's relatively stable operating profile considering the competitive operating environment, in addition to weak housing and high unemployment trends. While Mediacom's service penetration levels and average revenue per unit (ARPU) profile continue to trail industry leaders as well as comparable rural oriented cable operators, Fitch acknowledges potential growth and operating profile enhancements that can be captured by increasing service penetration levels.

The ratings are also supported by Mediacom's strong liquidity position and favorable scheduled maturity profile. Mediacom has an aggregate of $734.5 million of revolving credit commitments with no outstanding balance, and an available borrowing capacity, net of $19.5 million of letters of credit totaling $716 million as of June 30, 2010. Ample borrowing capacity from Mediacom's subsidiary credit facilities coupled with Fitch's expectation that Mediacom will continue to generate positive free cash flow provide Mediacom sufficient financial flexibility to satisfy the company's liquidity requirements including $13 million of scheduled amortization during the balance of 2010, and $26 million of annual amortization during 2011 through 2014.

Rating concerns center on the company's high leverage relative to its peer group and other larger cable MSOs, the company's ability to maintain its competitive position relative to the threat posed by the direct broadcast satellite (DBS) operators and the limited fiber-to-the-node build by Qwest Communications International, Inc. (Qwest), maintaining an appropriate balance between subscriber unit growth, promotional discounting and generating free cash flow and growing retail revenues beyond the company's core 'Triple Play' service offering. Fitch points out that event risks, related to how Mediacom intends to use borrowing capacity existing on the company's revolvers and free cash flow generation, are elevated within Mediacom's overall credit profile.

Total debt outstanding as of June 30, 2010 increased $32 million relative to year-end 2009 to approximately $3.4 billion. Mediacom's improved operating profile, as evidenced by strong EBITDA growth and margin expansion since 2007, while holding debt levels relatively constant and generating positive free cash flow, has strengthened the company's credit profile and credit protection metrics. On an latest 12-months (LTM) basis, Mediacom's leverage was 6.2x as of June 30, 2010. Going forward Fitch expects that modest improvements to Mediacom's operating profile will likely lead to a continued gradual strengthening of the company's credit profile. Fitch anticipates that Mediacom's leverage will approximate 6.0 times (x) by year-end 2010 and improve to 5.7x by the end of 2011 while continuing to generate positive free cash flow during this timeframe.

The Stable Outlook incorporates Fitch's expectation that Mediacom's credit profile will continue to improve, albeit at a slow pace, during the current ratings horizon, driven by relatively steady operating metrics, declining capital intensity and modestly growing free cash flow.

Fitch has affirmed the following ratings with a Stable Outlook:

Mediacom Communications Corporation

--IDR at 'B+'.

Mediacom Broadband LLC

--IDR at 'B+';

--Senior unsecured at 'B/RR5'.

Mediacom LLC

--IDR at 'B+';

--Senior unsecured at 'B/RR5'.

Mediacom Illinois LLC

Mediacom Arizona LLC

Mediacom Indiana LLC

Mediacom California LLC

Mediacom Minnesota LLC

Mediacom Delaware LLC

Mediacom Wisconsin LLC

Mediacom Southeast LLC

Mediacom Iowa LLC

Zylstra Communications Corporation

--IDR at 'B+';

--Senior secured at 'BB+/RR1'.

MCC Georgia, LLC

MCC Illinois, LLC

MCC Iowa, LLC

MCC Missouri, LLC

--IDR at 'B+';

--Senior secured at 'BB+/RR1'.

Additional information is available at 'www.fitchratings.com'.

These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:

--'Corporate Rating Methodology' (Aug. 16, 2010);

--'Liquidity Considerations for Corporate Issuers' (June 12, 2007).

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